MNI POLICY: Fed Balance Sheet Near Record, +USD29B to USD7.09T

The Fed's balance sheet approached a record high, up USD29 billion to USD7.09 trillion, while Chair Jerome Powell told Congress Thursday slimming it down will happen "way down the road" as maturing assets roll off.

Treasuries rose to a record USD4.43 trillion from USD2.5 trillion in March and mortgage-backed securities rose to a record USD2.02 trillion from USD1.4 trillion, according to a weekly holdings report. After cutting rates to around zero, the Fed is buying at least USD120 billion a month in Treasuries and MBS a month to support the economy through the Covid-19 pandemic.

The Fed's total portfolio is up 67% since early March. Total assets peaked at a record USD7.17 trillion in early June. The balance sheet also 36% of U.S. GDP, up from 19% at the beginning of the year.

Currency swaps with foreign central banks continued to roll off its portfolio by USD20 billion to a new low of USD32 billion, and corporate bond purchases continued at a USD9 million daily average while reaching a total of USD12.9 billion.

MAIN STREET BLUES

The Main Street Lending Program was up USD392 million to USD1.8 billion. Chair Powell told lawmakers Thursday the Main Street program might total "Ten, twenty, thirty billion dollars by the end of the year."

The Main Street program was again under criticism this week from Congress for not supporting the economy more, and Powell said the program may only see minor tweaks. "There is nothing major that we see now that would be consistent with opening it up further," he said.

The Fed chief, alongside Treasury Secretary Steven Mnuchin, Thursday also indicated support for Congress to reroute USD200 billion in unused money that was originally meant to backstop the emergency 13(3) facilities. That money instead could to go to forgivable small business loans that lawmakers are considering as stimulus.